Tesla drops Model Y starting price below the average US vehicle

TESLA is now charging less for the cheapest version of the Model Y sport utility vehicle (SUV) than what the typical new vehicle sells for in the US, a threshold Elon Musk crossed in blazing fashion.

At US$46,990, the base Model Y now costs US$759 less than the average amount paid for a car or truck in the US. The differential between these figures has changed by more than US$20,000 since the middle of last year.

No carmaker has made such a dramatic a reduction to a high-volume vehicle in the modern age of the automobile. The Model Y was the best-selling electric vehicle (EV) in the US last year, and one of the top SUVs of any type.

While Musk has denied that Tesla is starting a price war, his peers see it differently. Ford Motor chief executive officer Jim Farley, whose Mustang Mach-E SUV lost considerable share to the Model Y last quarter – despite some discounting – said last week that price battles are “breaking out everywhere”.

Indeed, Tesla has been slashing prices beyond America’s borders. French carmaker Renault last week called Tesla’s cuts a challenge and said it was examining its pricing strategy in response.

In China, automakers have followed Tesla with steep discounts, and at least one analyst has warned some companies might not survive the price war.

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Morgan Stanley analyst Adam Jonas said last week that Musk’s US cuts are so aggressive, they may lead some automakers to slow down their breakneck pace of investment in EVs and rather than compete with Tesla on price in an uncertain economy.

“We are questioning whether this is the ‘moment’ where the boards of the legacy OEMs (original equipment manufacturers) can reconsider dialling back the magnitude and timing of their EV capex and research-and-development plans,” Jonas said. BLOOMBERG